By ALBERT S. WAXMAN, PhD

Healthcare reform has finally made its way through the U.S. political machinery, emerging with a $1 trillion reform plan extending health insurance to 32 million additional Americans and eliminating other barriers to healthcare insurance.

To be sure, it’s a good start: America has finally joined the world’s other developed nations and made healthcare a national requirement for most citizens. However, there is a real risk that we have traded one problem for another.

The healthcare reform law – formally, the Patient Protection and Affordable Care Act (PPACA) – does very little to address the underlying costs and structural issues that have driven healthcare costs to rise at about 2 ½ times the annual rate of inflation. Adding 32 million people to these bad economics will place additional stress on a system that continues to swell. Failure will lead an existing $2.5 trillion industry to inflate to more than $4.5 trillion in 2019, according to The Centers for Medicare and Medicaid Services, and further weaken the U.S. economy.

Transformative change in our healthcare system is required, and this can only be achieved through innovation and the adoption of new ideas. Such a healthcare industrial revolution would go far toward eliminating the 30 percent waste and error characteristic in today’s system and improving U.S. global competitiveness via the creation of new products for export. If created and executed properly, disruptive models of healthcare services and new medical technologies will be the foundation for opportunities to create new businesses based on 21st century technology.

Here are six suggestions to bring about the changes needed:

•An efficient system to prevent and manage chronic illnesses, such as diabetes and hypertension, which account for 78 percent of all healthcare expenses in Medicare. Technology can help improve care management to prevent costly procedures and to incentivize consumers to live healthier lifestyles.

•Error reduction in inpatient, ambulatory, and post-acute care. These errors – a staggering 19 percent error rate in medication administration errors at hospital bedsides alone — are the result of poor information flow and fallible human behavior. Innovative solutions to help care administrators avoid costly and tragic mistakes have begun emerging and have demonstrated positive clinical outcomes.

•Focused technology and services to address and reduce the diabetes epidemic, which costs an estimated $170 billion annually in the U.S. Improved diagnostic solutions and healthcare management programs will go a long way in controlling the spiraling costs.

•New medical technology to enable earlier and better diagnosis and thus earlier intervention to mitigate the impact of high-cost, high-morbidity diseases. Continued innovation around technologies that help identify diseases earlier will have a vital financial and clinical impact.

•Medical devices to foster less invasive and more effective surgical interventions. New minimally invasive surgical technologies will enable care givers and hospitals to provide treatment options that reduce inpatient use and result in fewer negative side effects and better clinical outcomes. A number of these technologies have already been developed and are being used successfully, but much more can be done.

•Lastly, venture capitalists must recognize and sponsor entrepreneurs committed to developing solutions for most of the previously mentioned challenges. Some already are doing this, which is why some of the required technology already exists. But we have a long way to go, especially in healthcare IT, which currently comprises less than 1% of venture capital investment. Venture capitalists must assume a leadership role in spurring the innovation needed to save not just America’s healthcare economy but its overall economy.

Failure to innovate will lead us down the path to a single payer system, which history shows is not a good solution, either. Every nation that has adopted a single-payer approach is experiencing healthcare inflation similar to or greater than what we are contending with in America.

Clearly, the huge and complex problems of healthcare must be attacked on multiple fronts, and the American healthcare economy is clearly a market poised for transformation. The passage of landmark healthcare legislation creates significant impetus to develop and market sound ideas and technologies to improve the health of our healthcare system. I’m optimistic this scenario will evolve because it is fundamentally the story of America’s history – one in which serious problems are solved and the country is renewed through industrial innovation and public/private partnerships that foster growth.

Albert Waxman, PhD, has more than 40 years leadership experience as an entrepreneur and investor in the healthcare economy, fueled by a particular focus on driving down costs, improving quality and aligning incentives across payers, providers and patients. As the CEO and founding partner of Psilos Group, co-headquartered in the Bay Area and New York City, he and his firm have funded and developed more than 38 innovative companies dedicated to this vision, including ActiveHealth, AngioScore, Click4Care, Definity Health, ExtendHealth and OmniGuide.